See important disclosures, including any required research certifications, beginning on page 43 China Financials Investment case: We see Joy City as an up-and-coming retail mall operator and manager in China. Backed by asset injections from parent COFCO Corporation (one of the largest state-owned business groups in China), Joy City now owns 8 Joy City complexes, with 29 property projects in 8 cities as well as 8 hotels and other residential and commercial projects. We think Joy City has developed a special product (Joy City mall) for China malls that is gaining acceptance from the young and upcoming consumer groups, enabling its malls to remain resilient amid slower retail sales growth. Over the years, it has formed partnerships with many brands (both international and domestic), which bodes well for its prospects in terms of achieving above-average growth in foot traffic and retail sales. Joy City has kicked off its asset-light strategy with its mall business, which we think could become a supplementary revenue growth driver to cushion the slowdown in retail sales growth. Under this strategy, it would either acquire a small stake in already-developed malls or help manage malls. We think that either way, there is the potential for it to achieve sustainable income growth, helped by the large number of poorly managed malls in China. It reported 2015 contract sales of CNY3.2bn (+79%) and we expect its robust sales growth to continue in 2016-17 (2016: +35%; 2017: +47%), on the back of CNY40bn of saleable resources. While we believe Joy City’s strong sales are sufficient to support its capex needs, we also think they will underpin our strong revenue growth forecasts for 2016-17 (2016: +41%; 2017: +35%). Thanks to its steady recurrent income and to having COFCO Corporation as its parent, Joy City has been able to enjoy low finance costs. Its overall funding cost of 5.8% for 1H15 was lower than its peers’ average of 6.7%, and we forecast it to drop to 5.4% for 2016 and 5.2% for 2017. It recently issued 5-year domestic corporate bonds with a 3.2% coupon rate, one of the lowest rates among Hong Kong-listed China developers. Catalysts: The potential share-price catalysts we see in 2016 are: 1) increased market recognition that Joy City has a sound and differentiated business model for its retail property business, 2) progress in the execution of its asset-light strategy, 3) the monetisation of its existing malls and the Joy City model, eg., securitisation, REIT, spinoff, partial stake disposal, etc. Valuation: We initiate coverage with a Buy (1) rating and 12-month TP of HKD1.52, based on a 50% target discount applied to our end-2016E NAV of HKD3.04. Our target 50% NAV discount is at the lower end of the current 50- 70% discount to market NAV for the mid-cap HK-listed China property firms. Risks: The key risks to our call include: 1) a further deterioration in China’s economy, which could impact retail sales and rents, and 2) difficulty in securing projects in good locations going forward. 29 January 2016 Initiation: upcoming landlord for upcoming consumers Building a potential franchise for upcoming consumers in China Leveraging on its asset light model to boost scale further Initiating with a Buy (1) rating and target price of HKD1.52 Source: FactSet, Daiwa forecasts Joy City Property (207 HK) Target price: HKD1.52 Share price (28 Jan): HKD0.98 | Up/downside: +55.1% Cynthia Chan (852) 2773 8243 [email protected]80 105 130 155 180 0.8 1.3 1.7 2.2 2.7 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Share price performance JCP (LHS) Relative to FSSTI (RHS) (HKD) (%) 12-month range 0.98-2.61 Market cap (USDbn) 1.53 3m avg daily turnover (USDm) 1.38 Shares outstanding (m) 12,234 Major shareholder COFCO Corporation (66.8%) Financial summary (CNY) Year to 31 Dec 15E 16E 17E Revenue (m) 5,643 7,976 10,805 Operating profit (m) 1,865 2,570 3,471 Net profit (m) 213 579 1,072 Core EPS (fully-diluted) 0.017 0.047 0.088 EPS change (%) (25.5) 172.0 85.2 Daiwa vs Cons. EPS (%) (47.2) (21.3) (17.6) PER (x) 47.5 17.5 9.4 Dividend yield (%) 0.4 1.4 2.6 DPS 0.003 0.012 0.022 PBR (x) 0.4 0.4 0.4 EV/EBITDA (x) 17.9 13.4 10.0 ROE (%) 0.8 2.1 3.8
Transcript
See important disclosures, including any required research certifications, beginning on page 43
China Financials
Investment case: We see Joy City as an up-and-coming retail mall
operator and manager in China. Backed by asset injections from parent
COFCO Corporation (one of the largest state-owned business groups in
China), Joy City now owns 8 Joy City complexes, with 29 property projects
in 8 cities as well as 8 hotels and other residential and commercial projects. We think Joy City has developed a special product (Joy City mall) for China
malls that is gaining acceptance from the young and upcoming consumer
groups, enabling its malls to remain resilient amid slower retail sales
growth. Over the years, it has formed partnerships with many brands (both
international and domestic), which bodes well for its prospects in terms of
achieving above-average growth in foot traffic and retail sales. Joy City has kicked off its asset-light strategy with its mall business, which we
think could become a supplementary revenue growth driver to cushion the
slowdown in retail sales growth. Under this strategy, it would either acquire a
small stake in already-developed malls or help manage malls. We think that
either way, there is the potential for it to achieve sustainable income growth,
helped by the large number of poorly managed malls in China. It reported 2015 contract sales of CNY3.2bn (+79%) and we expect its robust
sales growth to continue in 2016-17 (2016: +35%; 2017: +47%), on the back of
CNY40bn of saleable resources. While we believe Joy City’s strong sales are
sufficient to support its capex needs, we also think they will underpin our strong
revenue growth forecasts for 2016-17 (2016: +41%; 2017: +35%). Thanks to its steady recurrent income and to having COFCO Corporation
as its parent, Joy City has been able to enjoy low finance costs. Its overall
funding cost of 5.8% for 1H15 was lower than its peers’ average of 6.7%,
and we forecast it to drop to 5.4% for 2016 and 5.2% for 2017. It recently
issued 5-year domestic corporate bonds with a 3.2% coupon rate, one of
the lowest rates among Hong Kong-listed China developers. Catalysts: The potential share-price catalysts we see in 2016 are: 1)
increased market recognition that Joy City has a sound and differentiated
business model for its retail property business, 2) progress in the execution
of its asset-light strategy, 3) the monetisation of its existing malls and the
Joy City model, eg., securitisation, REIT, spinoff, partial stake disposal, etc. Valuation: We initiate coverage with a Buy (1) rating and 12-month TP of
HKD1.52, based on a 50% target discount applied to our end-2016E NAV of
HKD3.04. Our target 50% NAV discount is at the lower end of the current 50-
70% discount to market NAV for the mid-cap HK-listed China property firms. Risks: The key risks to our call include: 1) a further deterioration in China’s
economy, which could impact retail sales and rents, and 2) difficulty in
securing projects in good locations going forward.
29 January 2016
Joy City Property
Initiation: upcoming landlord for upcoming consumers
Building a potential franchise for upcoming consumers in China
Leveraging on its asset light model to boost scale further
Initiating with a Buy (1) rating and target price of HKD1.52
Tianjin Joy City Tianjin 100% 531,369 83,965 2012 8.7 99% 250 9.9 99% 148
Yantai Joy City Yantai 51% 219,964 78,267 2014 2.4 96% 33 3.2 94% 42
Chengdu Joy City Chengdu 100% 314,560 95,200 2015 - - - - - -
Hangzhou Joy City Hangzhou 55% 307,061 - 2017 - - - - - -
Total
2,969,173 652,601
1,518
850
Source: Joy City, Daiwa Note: Shanghai Joy City Phase 1 South was completed in 2011, while Phase 1 North was completed in 2015.
A proven model with a solid track record
Having the right strategy differentiates Joy City malls Joy City has put in a lot of effort into developing the right strategy for its malls in past
years. Through data mining and analysis and also trial and error, it has fine-tuned its
strategy for its malls and come up with a business model that we believe enables its malls
to succeed and stand out among their competitors.
In terms of business strategy, Joy City mainly focuses on targeting the right group of
customers, selecting the right brands, choosing a strategic location for its malls, and also
enhancing customers’ value through the provision of value-added services and an O2O
shopping experience.
Good track record resulting from the right strategy As a result of having the right target customers, the right brands, strategic locations and
quality management, most of Joy City’s malls have seen decent growth in foot traffic and
retail sales since the commencement of operations.
Joy City malls to stay resilient amid slowdown in retail sales growth With growth in the overall economy likely to slow further in 2016, retail sales growth is also
likely to falter. Daiwa’s house forecast calls for nationwide retail sales growth of 9.6% YoY
for 2016, down from 10.7% for 2015. Despite a potential slowdown in overall retail sales
growth and more competitive retail market, we believe Joy City’s malls, with their right
strategy, would be able to continue to grab market share and see retail sales growth
exceed the nationwide average in 2016, as they have in the past few years. In the first half
of 2015, total retail sales for Joy City’s malls increased by 22.1% YoY, while nationwide
retail sales rose by only 10.4%.
Shanghai Joy City Phase
1 North and Chengdu
Joy City commenced
operations in December
2015
Joy City has come up
with a business model
that differentiates its
malls and enables them
to succeed
7
Joy City Property (207 HK): 29 January 2016
Targeting up-and-coming consumers
One-stop shopping experience for middle-class younger generation
Joy City’s malls are positioned as stylish and trendy shopping malls targeted at the middle
class younger generation of 18-35 years old. Its malls aim to provide a one-stop shopping,
entertainment and dining experience for these targeted customers, with their wide range of
brands, different types of cuisine and various entertainment facilities.
Themed pedestrian streets popular amongst younger consumers
To cater for the preference of the younger generation in particular, Joy City has created
special attractions, such as themed pedestrian streets, at a few of its malls. For example,
“Cheer Market”, which is located in Tianjin Joy City, is positioned as an indoor pedestrian
art street, and features shipping containers where young entrepreneurs can set up shop
and undertake their own interior design and decor. Another example is “Joy Yard” in Beijing
Chaoyang Joy City. “Joy Yard” is considered an indoor utopia and nature setting, with 35%
of its indoor space adorned by greenery and natural elements, such as stone, wood and
water. The mall consists of 32 creative shops including trendy cafes and restaurants, a
painting studio, a cultural bookstore, etc. Other special projects of Joy City that cater to the
tastes of young customers include “No. 5 Garage” in Tianjin Joy City, “Mofang 166” in
Shanghai Joy City and also, “Gulu School” in Chengdu Joy City.
Cheer Market at Tianjin Joy City Joy Yard at Beijing Chaoyang Joy City
Source: Joy City, Daiwa Source: Joy City, Daiwa
Major shift in consumption in China driven by younger generation
20-30 year olds set to become the core of the middle class in China
Over the past 3 decades, the shopping habits of Chinese consumers have changed
drastically as incomes have risen and new products and concepts have emerged in the
Chinese market. Nowadays, the consumer market in China is largely driven by a new
generation of young, prosperous and independent consumers who were born in the 1980s
and later.
Since the one-child policy was implemented in China in 1979, parents have become more
generous in providing financial support to their children and afforded them with more
comfortable financial prospects and larger budgets. As people born in the 1980s and later,
and with less experience with hardship than their parents and being more exposed to
different cultures, these young people are usually characterised as being more
independent-minded, less price-sensitive, quality conscious, loyal to brands and prefer
niche products over mass-market products. Moreover, this younger generation is usually
more attracted to Western products and are more accustomed to Western brands and
products. According to AC Nielsen forecasts, the 20-30 age group will become the core of
the middle class in China, and will contribute 35% to total consumption in China by 2020,
up from 15% in 2014.
Joy City malls target the
middle-class younger
generation of 18-35
years old
8
Joy City Property (207 HK): 29 January 2016
Breakdown of population among age groups
Source: NBS, Daiwa
With the expected increased contribution to nationwide consumption and the growing
influence of the younger generation in the China consumer market, many companies have
adapted to this new generation of young consumers by differentiating their products and
adjusting their branding and marketing strategies to appeal to younger consumers. We
think Joy City has chosen the right group of target customers for its malls and will continue
to benefit from this strategic choice.
A growing pool of partnering brands – local and international
80 core brands, many of which are renowned international brands
Joy City has around 300-400 shops in each of its Joy City malls. In order to maintain
consistent quality in terms of the brands and products across all its malls, the company has
developed a classification management system especially for its malls to integrate
resources, adopt standardised management and ensure smooth and stable business
operations.
In terms of the brands at the Joy City malls, they are classified into 3 classes. Some 30%
of them are core brands, of which Joy City has around 80. Some examples of its core
brands are Apple, ZARA, UNIQLO, Muji, Sephora, Starbucks and H&M. Then, 40% of the
brands are picked from a list of non-core brands, with which Joy City has cooperated in the
past. The remaining 30% of brands are chosen in accordance with either the shopping
habits and behavior of local shoppers or the local culture and characteristics. For example,
bars with trendy interiors and decor are popular in Chengdu.
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014
Below 20 years old 20-29 years old Above 29 years old
Joy City has good
connections with its
core brands, which add
up to around 80 of them
9
Joy City Property (207 HK): 29 January 2016
Joy City: core brands
Source: Company, Daiwa
Foreign fashion brands gaining popularity, especially among the young
With increasing product knowledge and stronger purchasing power, consumers in China,
especially the younger generation, are increasingly demanding quality and comfort in
clothing. Moreover, with more exposure to the Western media, Chinese consumers are
now more aware of global fashion trends, and are less price-conscious but more brand-
conscious. They generally trust foreign brands for their strong brand image, services,
quality, fit and cut.
As Chinese consumers increasingly demand stylish, quality products, foreign brands, in
particular fast fashion retailers like Zara, H&M and Uniqlo, are expected to see decent
retail-sales growth in China over the next few years. By focusing on China’s booming
middle class, these brands have sought to lure the younger generation by offering stylish
designs at cheaper prices and customised promotions. These foreign fashion brands use
big data to spot market trends and have developed a good understanding of consumer
behavior. They monitor consumer behavior of different age groups in stores and then
adjust their designs accordingly. From the below table, we can see that foreign fashion
brands (ie, UNIQLO, Zara and H&M) have been gaining market share in the past few
years, while local apparel and footwear brands like Belle and Meters/bonwe have been
losing market share.
Market share of domestic and foreign apparel/footwear brands
2011 1.0 1.2 1.9 0.9 2.6 1.2 1.3 1.1 0.9 1.5
2012 1.3 1.3 1.8 1.0 1.9 1.1 1.3 1.0 0.9 1.0
2013 1.5 1.4 1.6 1.1 1.4 1.0 1.1 0.9 0.8 0.9
2014 1.6 1.5 1.5 1.2 1.1 1.0 0.9 0.8 0.8 0.7
Source: CKGSB Knowledge, Euromonitor; Note: *Owned by Belle International
The younger generation
generally prefers foreign
fashion brands over
local brands
10
Joy City Property (207 HK): 29 January 2016
Joy City malls are strategically located
Located in popular business hubs or areas with huge potential for development
Of Joy City’s 8 shopping malls, 3 are located in tier-1 cities (Beijing and Shanghai) and the
remaining 5 are in upper tier-2 cities (Shenyang, Tianjin, Yantai, Chengdu and Hangzhou)
where the purchasing power of local shoppers is typically higher than that in the lower-tier
cities. Moreover, as the Joy City malls are designed and developed with an aim to become
the focal point of their respective areas, and also to add value to adjacent areas within the
city, they are also strategically located in each of the cities.
Beijing Xidan Joy City is a landmark located in the centre of the Xidan commercial area, a
popular business hub in Xicheng District in Beijing. It is well-connected to transportation
networks and is in close proximity to metro stations and bus stops. Beijing Chaoyang Joy
City is situated in the core of Chaoqing area to the east of Beijing and is also connected by
metro lines and bus stops. Due to the eastward shift in the city’s development focus, the
Chaoqing area has more and more high-end residential buildings and is becoming a
“central living district”.
Tianjin Joy City is located in a core area within the Inner Ring in Tianjin and is at the
intersection point of the city transportation network. It is close to other tourist attractions
like cultural street and Gulou commercial streets, and within 5km of the mall lives a
population of 3.3m. Shanghai Joy City is in the core of the Suhewan in Zhabei District in
Shanghai and is in close proximity to the Nanjing East Road and People’s Square
business hub. With its core location, it can divert and attract some of the shoppers in the
Nanjing East Road business hub and has the potential to become the centre of a new
Suhewan business hub.
Chengdu Joy City, which commenced operations in December 2015, is situated in Wuhou
District in Chengdu, a high-tech cultural district. This area comprises a lot of mid-to-high
end residential projects and has a permanent population of around 0.5m, which could
increase to 1.5m in the medium to long term. Hangzhou Joy City, the newest addition to
Joy City’s shopping mall portfolio, is located in a new Yunhe business hub in Gongshu
District in Hangzhou and is some 20 minutes away from the city centre. This new business
hub will be one of the development focuses of the local government and will include a
cruise terminal next to the Jinghang Canal. Two metro lines close to Hangzhou Joy City
are expected to start operating in 2019-20.
Enhancement of customer value
Data collection to identify target customers’ needs and interests
To identify the needs and interests of target customers, Joy City has been consistently
collecting data from each customer through different channels, eg, consumption records
through WeChat payment, customers’ age and gender and frequently visited places
through WeChat and Unionpay, customers’ consumption pattern and duration of stay in
each of the stores through wifi data. Using this collected data, the company predicts
customers’ consumption behaviour and possible visits to stores, and applies tailor-made
marketing to each of the customers.
Moreover, Joy City has developed a foot traffic forecasting system which collects foot traffic
statistics and allows the company to predict foot traffic and adjust the allocation of tenants
to optimise the shopping experience of customers.
Joy City malls are
strategically located
either in popular
business hubs or areas
with huge potential for
development
Joy City relies on big
data to identify
customers’ interests and
consumption behaviour
11
Joy City Property (207 HK): 29 January 2016
Valuation creation for customers
Membership programme to add value Joy City has developed a membership programme named “Joy Citizen” for customers at its
malls, whereby members can enjoy discounts at selected stores, participate in activities
exclusively for members, enjoy free parking, use baby strollers and nursing room at the
malls, obtain bonus points to redeem gifts, etc.
Promotion activities for Joy City’s members “Joy Citizen”
Source: Joy City
As at June 2015, Joy City had over 1m members nationwide in its Joy Citizen programme
and nearly 950,000 WeChat followers. Tianjin Joy City alone had 200,000 members and
110,000 WeChat followers. Besides having special-themed streets like “Cheer Market”,
“Shen Shou Si”, “0618 Street” and “No. 5 Garage”, Tianjin Joy City launched “Taste Good”,
the first O2O member experience platform nationwide. This platform comprises an online
shopping mall and offline physical stores, whereby members can collect bonus points and
redeem gifts. “Taste Good” even collaborated with China Merchants Bank and set up its
first branch outside Joy City at the China Merchants Bank Anxi Road branch, where
members of China Merchants Bank can also enjoy the services provided by “Taste Good”.
Tianjin Joy City achieved
satisfactory results as a
result of its special-
themed streets and its
member experience
platform
12
Joy City Property (207 HK): 29 January 2016
“Taste Good” membership centre
Source: Joy City, Daiwa
At Shanghai Joy City, an intelligent shopping system – WeChat electronic membership was
launched. This electronic membership on WeChat makes shopping more convenient for
members as it includes information on promotion coupons, discounts, membership
activities, bonus points, etc.
WeChat electronic membership for customers at Shanghai Joy City
Source: Joy City, Daiwa
Collaboration with O2O service providers Joy City has collaborated the tenants at its malls with O2O service providers (ie, Baidu
Waimai, Meituan) in order to provide value-added services to customers, and at the same
time, increase promotion for its tenants. For example, customers will receive shopping
coupons at Joy City malls upon the browsing and purchases on the O2O services
providers’ websites.
All of Joy City’s malls
have some sort of O2O
platform or business to
create value and
enhance customers’
shopping experience
13
Joy City Property (207 HK): 29 January 2016
O2O mobile payments To further enhance customers’ shopping experience, Joy City has introduced O2O mobile
payment methods for customers at its malls. These payment methods include QR Code
payment, WeChat payment, Shake n Pay, Sound Wave payment, etc.
Growing credentials
Decent growth in foot traffic, retail sales and rental for existing malls
As a result of having the right target customers, the right brands, strategic locations and
quality management, most of Joy City’s malls have seen decent growth in foot traffic and
retail sales since commencement of operations.
Higher foot traffic for most malls in past years
Looking at the below table that depicts foot traffic, all of Joy City’s malls besides Shanghai
Joy City Phase 1 South have recorded sequentially higher YoY foot traffic in the past few
years. Tianjin Joy City, which started operations in 2012, saw very strong YoY foot traffic
growth of 51% and 29% for 2013 and 2014, respectively. We expect its foot traffic in 2015
to also see decent growth, given that in 1H15 foot traffic was already some 26% higher
than that for 1H14. Yantai Joy City, on the other hand, is also expected to record strong
foot traffic growth in 2015 as it commenced operations only in 2014.
Source: Bloomberg, Daiwa forecasts for stocks not marked with * Note: *are stocks not covered by Daiwa and are based on Bloomberg estimates
Joy City’s high PER
should come down over
2016-17, while its PBR is
below the sector average
29
Joy City Property (207 HK): 29 January 2016
Share-price performance
Slow share-price performance largely factors in the near-term negatives
In the past month (29 December-28 January), share prices in the China property sector
have fallen by 20% on average, in line with the 18% decline in the HSCEI index. During
this period, Joy City’s share price declined by 18%, in line with its peers. Compared to a
year ago, its share price has come down by 36%, vs. the 19% overall decline for the China
property players. We think this could be due to the market expecting lower earnings for the
company for 2015. Besides, Joy City’s contract sales performance for 9M15 was slow in
terms of sales target completion, as it only launched its Shanghai Joy Mansion One and
Hangzhou Joy mansion residential projects in November 2015.
We believe the company’s lagging share-price performance over the past year has largely
factored in the near-term negatives, ie, a significant decline in earnings for 2015. Hence,
we recommend investors Buy into Joy City on its recent share price weakness.
Joy City: share price
Source: Bloomberg, Daiwa
0
1
2
3
4
5
6
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
(HKD)
Announcement of the first asset injection
Announcement of the second asset injection
We think Joy City’s
lagging share-price
performance over the
past year has largely
factored in its likely
weak 2015 results
30
Joy City Property (207 HK): 29 January 2016
Risks
Deterioration in economy to impact retail sales and rents
Joy City’s rental income from its retail malls account for a decent proportion of its total
revenue and is likely to stay that way in the next few years. With overall growth in the
China economy likely to slow further in 2016, nationwide retail sales growth is likely to be
dragged down as well in the years to come. Daiwa’s house view calls for nationwide retail
sales growth of 9.6% YoY for 2016, down from 10.7% for 2015. Lower retail sales would
have a direct impact on turnover rents and potential indirect impact on base rents. We
would see this as the main risk to our Buy (1) rating on Joy City stock.
The rise of e-commerce
The increase in the number of online retail platforms, such as Alibaba and JD.com, has
meant that online shopping is now playing a more prominent role in the retail environment.
According to the China Internet Information Centre, Internet retail sales in China rose by
41% YoY to CNY1,850bn in 2013, representing a CAGR of 81% over 2005-13. Over that
period, online retail sales’ proportion of China’s total retail sales of consumer goods
increased from just 0.2% of 2005 to 7.8% in 2013. We believe the increasing significance
of online retail poses a threat to physical stores in department stores, shopping malls and
pedestrian streets.
Difficulty in securing projects in good locations going forward
The good operating performance of most of Joy City’s existing malls is to some extent
attributable to their strategic locations. Hence, the success of Joy City’s asset-light strategy
on its retail malls and the operating performance of its new malls would depend to a
degree on whether or not Joy City would be able to secure quality projects in good
locations. With competition over quality projects in the upper-tier becoming more and more
intense, we are concerned that it would be difficult for Joy City to obtain projects that would
offer returns as good as its existing projects.
Slow property sales which would lead to pressure on cash flow
Joy City’s capex for its malls in the next few years would be largely supported by its
proceeds from property sales, which we expect to see strong growth in 2015-17. However,
a slower economy could also lead to slower property sales as well as retail sales, which in
turn could put pressure on cash flow, as incoming cash would not be sufficient to support
capex.
31
Joy City Property (207 HK): 29 January 2016
Appendix I: company background
Commercial property developer and operator
Project exposure in 11 major cities
Joy City is a commercial property developer and manager that focuses on the
development, operation, sales, leasing and management of shopping malls under its “Joy
City” brand and other commercial properties in Mainland China. It also develops residential
properties and operates hotels in a few major cities. As at end-June 2015, the company
had 20 residential and commercial projects and 8 hotels in 11 cities, including Beijing,
Shanghai, Tianjin, Shenyang, Yantai, Chengdu, Hangzhou, Sanya, Hong Kong, Nanchang
and Suzhou. It had 0.9m sqm of leasable commercial properties, 0.4m sqm of attributable
operational area in hotels and 0.6m sqm attributable GFA of property development
projects.
Joy City: map of its landbank
Source: Company, Daiwa Note: The numbers in the boxes next to the city names represent the number of the respective type of properties in each of the cities.
32
Joy City Property (207 HK): 29 January 2016
The sole commercial property business platform of COFCO Corporation
Joy City is 66.83% owned by its parent, COFCO Corporation, and is the only commercial
property business platform of the group. COFCO Corporation is a conglomerate operating
different businesses, of which 8 are listed in Hong Kong or China. It is one of the 21 state-
owned enterprises that has been granted approval by the SASAC to engage in real estate
development, investment and management. Besides Joy City, COFCO Corporation also
has an onshore listed property company, COFCO Property (000031 CH, Not rated), which
is engaged mainly in residential property development.
History of Joy City
Joy City was formerly named The Hong Kong Parkview Group, an investment holding
company engaged in property investment business in Hong Kong. Its principal asset is an
office premises on the 11/F of World-Wide House in Central. In July 2012, COFCO
Corporation acquired a 73.5% interest in The Hong Kong Parkview Group to create a shell
company for its property assets. This was followed by 2 major asset injections by COFCO
Corporation.
The first major asset injection
The first asset injection was announced in September 2013, whereby COFCO Corporation
injected 12 property projects into The Hong Kong Parkview Group, including Chengdu Joy
City, Beijing COFCO Plaza, 2 other commercial properties in Hong Kong and Shanghai, 7
hotels and some properties in Sanya. The total consideration for this asset injection was
HKD14.17bn, representing a 25% discount to the net asset value of the properties of
HKD14.45bn as at end-June 2013 plus HKD3.33bn of shareholders’ loans. The
consideration was satisfied by the placing of 1.955bn of shares at HKD2/share to
professional and institutional investors, and also the issuance of 1.095bn of convertible
preference shares and 5.988bn of consideration shares to COFCO Corporation. The asset
injection was completed in December 2013 and the company name was changed to
COFCO Land Holdings Limited.
The second major asset injection
The second asset injection was announced in September 2014, whereby COFCO
Corporation injected 6 mixed-use complexes under the flagship brand “Joy City” and a
further stake in Beijing COFCO Plaza and Shanghai COFCO Tower into COFCO Land.
The total consideration was HKD12.46bn, which was based on a 42.69% discount to the
net asset value of the properties of HKD20.0bn as at end-June 2014 plus HKD0.996bn of
shareholders’ loans. The consideration was satisfied partly by the issuance of USD800m
3.625% guaranteed notes due in 2019 and partly by a 1-for-2 rights issue at a subscription
price of HKD1.35/share. The asset injection was completed in December 2014 and the
company name was changed to Joy City Property Limited.
Joy City: summary of key milestones
2007 Grand opening of Beijing Xidan Joy City
2009 Grand opening of Shenyang Joy City
2010 Grand opening of Beijing Chaoyang Joy City
Grand opening of Southern Tower of Phase 1 of Shanghai Joy City
2011 Grand opening of Tianjin Joy City
2012 COFCO Corporation acquired 73.5% stake in The Hong Kong Parkview Group Limited
2013 Announced and completed the acquisition of 12 property projects from COFCO Corporation, including Chengdu Joy City, Beijing COFCO Plaza, 2 commercial properties in Hong Kong and Shanghai, 7 hotels and a few properties in Sanya
Company name changed from The Hong Kong Parkview Group Limited to COFCO Land Holdings Limited
2014 Further acquired stake in projects in Shanghai and properties in Sanya
Grand opening of Yantai Joy City
Announced and completed the acquisition of 6 "Joy City" malls
2015 Company name changed from COFCO Land Holdings Limited to Joy City Property Limited
Acquisition of land plots to develop Hangzhou Joy City
Acquisition of 50% stake in Shanghai Qiantan project
Acquisition of further stake in Beijing Andingmen project
Source: Company, Daiwa
Joy City has received 2
asset injections from its
parent in the past and
altogether has acquired
18 projects
33
Joy City Property (207 HK): 29 January 2016
Rental income to account for 39% of total revenue for 2015E
Typically, for Joy City’s mixed-use projects, around 60% of GFA (ie, residential, office and
podium retail portion) would be available for sale while the remaining 40% (ie, shopping
malls) would be held as investment properties. In 2015, we estimate gross rental income
from investment properties accounted for the largest proportion of 39% of Joy City’s total
revenue, followed by 27% from property sales and 20% from hotel operations. However, in
2016-17, while we forecast rental income to see strong growth, we anticipate revenue from
property sales to account for a larger proportion of total revenue due to more saleable
projects and the booking of more projects during the period.
Joy City: total revenue in 2013-17E Joy City: revenue breakdown by business in 2015E
Source: Company, Daiwa forecasts
Source: Company, Daiwa forecasts
Experienced management team
Joy City has an experienced management team. Most of the team have been with the
company for a long time and have extensive experience in operations, management or the
property business.
Joy City: management profile
Position Brief introduction
Zhou Zheng Chairman and executive director Mr Zhou has over 20 years of experience in corporate management and is currently a council member of the China Real estate Association. He was appointed an executive director in August 2012 and was appointed as Chairman in December 2013. He is also the Chairman of COFCO Property (000031 CH) and a vice president of COFCO Corporation.
Han Shi General manager and executive director Mr Han joined COFCO Corporation in August 1990 and has over 20 years of management experience in project management, project investment and general management. Since 2007, he has been responsible for the commercial real estate business of the COFCO Group and also, the establishment and development of the "Joy City" brand.
Shi Zhuowei Non-executive director Mr Shi joined COFCO Corporation in July 1993 and was the chairman of COFCO Land from July 2011 to May 2013. He has extensive experience in project management, project investment, human resources development and general management.
Ma Jianping Non-executive director Mr Ma was Chairman and executive director of Joy City but resigned as Chairman and was re-designated as non-executive director in December 2013. He joined COFCO Corporation in August 1986 and has been its vice president and its strategy department director since May 2010 and January 2006 respectively. He is currently also a director of COFCO Property, the deputy managing director of COFCO (HK) and a director of certain other subsidiaries of COFCO Corporation.
Ma Wangjun Non-executive director Mr Ma joined COFCO Corporation in August 1988 and is currently the chief accountant of COFCO Corporation. He has extensive experience in corporate finance and asset management.
Jiang Hua Non-executive director Ms Jiang joined COFCO Corporation in September 2004 and was a director of COFCO Corporation during September 2004 to December 2012. She was re-appointed as director of COFCO Corporation since December 2013. She has extensive experience in corporation management, administrative management and government relations.
Source: Company, Daiwa
0
3,000
6,000
9,000
12,000
15,000
2013 2014 2015E 2016E 2017E
Sale of properties Gross rental income Hotel operations
Property management Others
6,809
(CNYm)
5,713 5,643
7,976
10,805 Sale of properties
27%
Gross rental income
39%
Hotel operations20%
Property management
6%
Others8%
34
Joy City Property (207 HK): 29 January 2016
Joy City: landbank summary
Name of project City Product type Stake Total GFA Attributable GFA Leasable GFA No. of guestrooms Attributable End-16 NAV
('000 sqm) ('000 sqm) ('000 sqm)
(CNY m)
Property investment
Xidan Joy City Beijing Retail/office 100% 185,654 185,654 66,267 - 10,734
Chaoyang Joy City Beijing Retail 90% 405,570 365,013 112,538 - 4,176
Shenyang Joy City Shenyang Retail 100% 555,146 555,146 121,643 - 1,972
Shanghai Joy City Shanghai Retail 100% 449,849 449,849 94,721 - 6,941
Tianjin Joy City Tianjin Retail 100% 531,369 531,369 83,965 - 4,130
Yantai Joy City Yantai Retail 51% 219,964 112,182 78,267 - 567
Chengdu Joy City Chengdu Retail 100% 314,560 314,560 95,200 - 3,161
Hangzhou Joy City Hangzhou Retail 100% 307,061 307,061 92,118* - 1,714
Yantai Joy City: description and operating results
Location Zhifu District, Yantai
Stake 100%
Leasable GFA 78,573 sq m
Date of completion 2014
Retail sales in 2014 CNY242m
Foot traffic in 2014 5.1 m
Rental income in 2014 CNY33m
Source: Company, Daiwa
90%
92%
94%
96%
98%
100%
0
1
2
3
4
2014 1H15
Rent Occupancy rate (RHS)
(CNY/sqm/day)
38
Joy City Property (207 HK): 29 January 2016
Appendix III: overview of the China retail market
10.7% retail sales growth in 2015
China retail market expected to become world’s biggest by 2018
Economic growth in China has decelerated from the double-digit growth in early 2000s to only
6.8% in 2015. However, relative to other developing markets, its economic growth and retail
sales growth are unparalleled, as its retail sales in 2015 grew by a decent 10.7% to reach
CNY30.1tn. According to PricewaterhouseCoopers (PwC), although retail sales growth has
dropped from 15.6% in 2009, China’s retail market is expected to see annual retail volume
growth of 8.7% in the next few years to overtake the US to become the world’s biggest retail
market by 2018.
Annual retail sales volume growth in countries in Asia
Territory 2011 2012 2013 2014 2015 2016 2017 2018
Australia -0.5 0.9 1.5 1.3 2.6 2.3 2.0 2.2
China 9.1 8.7 9.3 8.8 8.7 8.6 8.0 7.9
Hong Kong 18.6 5.5 6.6 * 3.1 2.0 -1.0 0.4 1.3
India 5.7 2.7 1.7 4.0 5.6 6.2 6.2 6.6
Indonesia 6.0 5.3 4.3 3.8 5.1 5.4 5.0 5.0
Japan 0.1 1.5 0.7 0.2 0.0 0.3 0.4 0.6
Malaysia 4.6 4.7 6.4 5.4 5.3 4.6 4.6 4.8
New Zealand -1.9 2.4 6.3 3.2 2.9 2.2 2.7 2.5
Pakistan 9.2 -0.8 5.1 3.9 4.1 3.8 4.3 4.3
Philippines 3.2 5.4 4.4 4.2 5.3 5.4 5.4 5.5
Singapore 1.7 1.1 1.2 4.6 1.5 2.2 3.0 3.5
South Korea 2.1 1.3 -0.1 1.6 2.9 3.1 2.8 2.9
Taiwan 3.6 0.6 2.5 2.9 2.5 2.4 2.7 2.3
Thailand 1.4 4.9 -2.4 -0.6 0.7 3.6 3.4 4.3
Vietnam 6.7 3.9 3.8 9.5 8.4 7.8 6.0 6.5
Source: Economist Intelligence Unit Figure for 2014 onwards are forecast. Prior years are actuals or estimates *0.6% (Growth figure released by the HK Census and Statistics Department on 2 Feb 2015)
Source: PwC
Achieved retail sales of various retail property assets in China in 2014
Source: linkshop.com, Google, Daiwa
Shopping malls to continue gaining market share against department stores
For the retail property sector in China, quality is the key, in our view. In general, we think the
culture of shopping in malls has just started to form in China, and believe shopping malls will
continue to gain market share against department stores and pedestrian streets, which have
been the dominant retail formats in China in the past. While many Chinese cities have
abundant retail space and shopping malls, those under systematic and professional
Daiwa Capital Markets America Inc. New York Head Office Financial Square, 32 Old Slip, New York, NY10005, U.S.A. (1) 212 612 7000 (1) 212 612 7100
Daiwa Capital Markets America Inc. San Francisco Branch 555 California Street, Suite 3360, San Francisco, CA 94104, U.S.A. (1) 415 955 8100 (1) 415 956 1935
Daiwa Capital Markets Europe Limited, London Head Office 5 King William Street, London EC4N 7AX, United Kingdom (44) 20 7597 8000 (44) 20 7597 8600
Daiwa Capital Markets Europe Limited, Frankfurt Branch Neue Mainzer Str. 1, 60311 Frankfurt/Main, Germany (49) 69 717 080 (49) 69 723 340
Daiwa Capital Markets Europe Limited, Paris Representative Office 17, rue de Surène 75008 Paris, France (33) 1 56 262 200 (33) 1 47 550 808
Daiwa Capital Markets Europe Limited, Geneva Branch 50 rue du Rhône, P.O.Box 3198, 1211 Geneva 3, Switzerland (41) 22 818 7400 (41) 22 818 7441
Daiwa Capital Markets Europe Limited, Moscow Representative Office
Daiwa (Shanghai) Corporate Strategic Advisory Co. Ltd. 44/F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road, Pudong, Shanghai China 200120 , People’s Republic of China
(86) 21 3858 2000 (86) 21 3858 2111
Daiwa Securities Co. Ltd., Bangkok Representative Office 18th Floor, M Thai Tower, All Seasons Place, 87 Wireless Road,
HEAD OFFICE 15-6, Fuyuki, Koto-ku, Tokyo, 135-8460, Japan (81) 3 5620 5100 (81) 3 5620 5603
MARUNOUCHI OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6756 (81) 3 5555 7011 (81) 3 5202 2021
New York Research Center 11th Floor, Financial Square, 32 Old Slip, NY, NY 10005-3504, U.S.A. (1) 212 612 6100 (1) 212 612 8417
London Research Centre 3/F, 5 King William Street, London, EC4N 7AX, United Kingdom (44) 207 597 8000 (44) 207 597 8550
43
Joy City Property (207 HK): 29 January 2016
Important Disclosures and Disclaimer
This publication is produced by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, and distributed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Group Inc., and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person. Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including market making activities, derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.
Ownership of Securities
For “Ownership of Securities” information, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Investment Banking Relationship
For “Investment Banking Relationship”, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Japan
Daiwa Securities Co. Ltd. and Daiwa Securities Group Inc.
Daiwa Securities Co. Ltd. is a subsidiary of Daiwa Securities Group Inc.
Investment Banking Relationship
Within the preceding 12 months, the subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Modern Land (China) Co. Ltd (1107 HK); econtext Asia Ltd (1390 HK); Accordia Golf Trust (AGT SP); GF Securities Co Ltd (1776 HK); Mirae Asset Life Insurance Co Ltd (085620 KS); China Reinsurance Group Corporation (1508 HK).
*Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司), Daiwa
Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd.
Hong Kong
This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司) (“DHK”) which is regulated by the Hong Kong Securities and Futures
Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research. Relevant Relationship (DHK)
DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.
Singapore
This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.
Australia
This research is distributed in Australia by Daiwa Capital Markets Australia Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research.
India
This research is distributed in India to Institutional Clients only by Daiwa Capital Markets India Private Limited (Daiwa India) which is an intermediary registered with Securities & Exchange Board of India as a Stock Broker, Merchant Bank and Research Analyst. Daiwa India, its Research Analyst and their family members and its associates do not have any financial interest save as disclosed or other undisclosed material conflict of interest in the securities or derivatives of any companies under coverage. Daiwa India and its associates may have received compensation for any products other than Investment Banking (as disclosed) or brokerage services from the subject company in this report during the past 12 months. Unless otherwise stated in BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action, Daiwa India and its associates do not hold more than 1% of any companies covered in this research report. There is no material disciplinary action against Daiwa India by any regulatory authority impacting equity research analysis activities as of the date of this report.
Taiwan
This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.
Philippines This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Phil ippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities.
For relevant securities and trading rules please visit SEC and PSE links at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively.
Thailand
This research is distributed to only institutional investors in Thailand primarily by Thanachart Securities Public Company Limited (“TNS”).
This report is prepared by analysts who are employed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates. This report is provided to you for informational purposes only and it is not, and is not to be construed as, an offer or an invitation to make an offer to sell or buy any securities. Neither Thanachart Securities Public Company Limited, Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees accept any liability whatsoever for any direct or consequential loss arising from any use of this research or its contents.
The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable. However, Thanachart Securities Public Company Limited, Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees make no representation or warranty, express or implied, as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. The use of any information, forecasts and opinions contained in this report shall be at the sole discretion and risk of the user.
Daiwa Securities Group Inc. and/or its non-U.S. affiliates perform and seek to perform business with companies covered in this research. Thanachart Securities Public Company Limited, Daiwa Securities Group Inc., their respective parent, holding, subsidiaries or affiliates, their respective directors, officers, servants and employees may have positions and financial interest in securities mentioned in this research. Thanachart Securities Public Company Limited, Daiwa Securities Group Inc., their respective parent, holding, subsidiaries or affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned in this research. Therefore, investors should be aware of conflict of interest that may affect the objectivity of this research.
United Kingdom This research report is produced by Daiwa Securities Co. Ltd. and/or its affiliates and is distributed in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange and Eurex. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.
Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory.
Germany
This document is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany.
Bahrain
This research material is distributed in Bahrain by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113
United States
This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect DCMA’s views at any time. Neither DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (Tel no. 212-612-7000).
Ownership of Securities
For “Ownership of Securities” information please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Investment Banking Relationships
For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. DCMA Market Making
For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Research Analyst Conflicts
For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions.
Research Analyst Certification
For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.
The following explains the rating system in the report as compared to relevant local indices, unless otherwise stated, based on the beliefs of the author of the report.
"1": the security could outperform the local index by more than 15% over the next 12 months. "2": the security is expected to outperform the local index by 5-15% over the next 12 months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next 12 months. "4": the security is expected to underperform the local index by 5-15% over the next 12 months. "5": the security could underperform the local index by more than 15% over the next 12 months. Disclosure of investment ratings
Rating Percentage of total
Buy* 63.9%
Hold** 21.3%
Sell*** 14.8%
Source: Daiwa
Notes: data is for single-branded Daiwa research in Asia (ex Japan) and correct as of 31 December 2015. * comprised of Daiwa’s Buy and Outperform ratings. ** comprised of Daiwa’s Hold ratings. *** comprised of Daiwa’s Underperform and Sell ratings. Additional information may be available upon request.
Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law
(This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.)
If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items.
In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.
In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan.
For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements.
There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements.
There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us.
Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc.
When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us.
Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association
